Expensive auctions will force operators to raise tariffs in India, warns COAI

The Cellular Operators Association of India (COAI) has warned that tariffs in India will be pushed up as a result of the high bids in the country’s recent spectrum auctions.

Following 8 days of bidding, the country’s 2G and 3G auctions brought in bids totalling INR1.02 trillion ($16.27 billion), with the bids for certain frequencies significantly exceeding their reserve prices. 14% of the total amount of auctioned spectrum is still available, meaning that prices will likely be pushed even higher.

COAI director-general Rajan Mathews said: “In the longer term, tariffs have to increase as the input costs of operators have been rising.” He added that this would likely be within 9 months to 1 year.

If operators intend to keep tariffs low in order to avoid deterring customers, they will have to turn to areas of India that still have no mobile coverage. The Ministry of Communication and Information Technology has reported that 10% of the country’s villages lack mobile connectivity, 20 years after mobile services were first launched.

Hill states such as Arunachal Pradesh, which borders China, typically fare the worst – more than half of the 5,258 villages in this state have no connectivity. Meanwhile, 23% of Andhra Pradesh’s 16,335 villages lack coverage, while overall at least 10% of villages in 13 of the country’s 29 states receive no mobile connectivity.

Despite having 941 million connections, India’s SIM penetration rate sits at around 74% - significantly lower than comparable high-population markets such as China (92%) and Indonesia (122%).

 

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